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A canoeist approaches the Route 28 Bypass bridge near the Deerneck boat launch at Lake Massabesic in Auburn. Manchester Water Works is looking for a buyer for 7,200 acres of forestland it has managed for more than a century. (DAVID LANE/UNION LEADER)

Manchester Water Works to sell acreage; towns to lose revenue

Two nonprofits are finalists for buying 7,200 acres of Manchester Water Works land in four area towns, meaning less property tax money for them but more money for Water Works to replace aging water mains.

At stake is more than $780,000 in collective tax payments paid to Auburn, Hooksett, Candia and Chester.

The town of Auburn could see a net loss of about $600,000 a year - enough to fund the fire department, the library and the parks and recreation department. It also represents about $1 on Auburn's tax rate, or about $350 a year for a home assessed at $350,000, according to Town Administrator Bill Herman.

"Any tax exemption or loss of revenue, every dollar one taxpayer saves, the other taxpayers make up for," Herman said last week. "The voters of Auburn have to make a choice to reduce expenditures by that amount of money or the other taxpayers in Auburn make up the difference in their tax bills."

Manchester Water Works paid Auburn a negotiated $670,000 payment last year for about 4,000 acres it owns in town, land used as a buffer to protect the water supply.

Herman said he would expect a nonprofit to pay at least some tax money even with its land in current use, which bases a tax bill not on its real estate market value but on its income-producing capability as if used solely for growing forest or agricultural crops.

"On average, current use is about 10 percent of what a normal tax bill would be," Herman said.

Both finalists - the Society for the Protection of New Hampshire Forests and the Southeast Land Trust of New Hampshire - plan to put the land in current use.

"They seem the best fits ... and have the ability to get this done," said Guy Chabot, deputy director for distribution at Manchester Water Works.

Chabot said officials hope to select one by year's end.

Duane Hyde, the land trust's land protection director, said he would like to work with Manchester Water Works to help the affected towns deal with the expected drop in tax revenue.

"You could phase the project, reach out to the communities and meet with them and find a way to structure the project, so they don't get an instantaneous fiscal impact," Hyde said.

On the flip side, Manchester Water Works, a city department, plans to use its tax savings to replace aging infrastructure. An extra $600,000 would allow for the replacement of 4,000 feet of water main, Chabot said.

Water Works serves customers in parts of Manchester, Londonderry, Goffstown, Hooksett, Bedford and Auburn. It also sells water to Pennichuck and to Derry.

For the first half of 2013, Water Works paid Auburn $340,287, Hooksett $28,252, Candia $21,791 and Chester $1,525 for property it now plans to sell, according to Chabot. The tax rates haven't been set in those towns for the second-half bills. Chabot said its overall Hooksett tax bill was a few thousand dollars higher, but Water Works expects to retain some property there, so the $28,252 represents land included in the sale.

Water Works officials eliminated two potential buyers, the Bear-Paw Regional Greenways, a land trust in Deerfield, and Green Crow, a for-profit company based in Washington state with an office in Auburn.

Chabot said the sale probably wouldn't have happened had the Legislature last year passed Senate Bill 337. That bill would have allowed Water Works to place the land in current use, substantially cutting its tax obligation.

Sen. Lou D'Allesandro, D-Manchester, one of the bill's sponsors, said the legislation got sent to study and "is pretty much a dead issue."

"I think people felt losing that amount of money would hurt" the other communities, he said.

D'Allesandro pointed out a similar situation, where Keene pays property taxes to Roxbury, a sum making up a third or more of that town's budget.

Keene paid more than $74,000 in property taxes to Roxbury last year for its ownership of 2,323 acres that includes watershed and reservoirs, according to Donna Hanscom, Keene's assistant public works director.

"It is funded by water users through the water rate charges," she said.

D'Allesandro said cutting the tax bill for Water Works would hurt the towns, but said water customers must foot the tax bills through their water rates.

Herman said Manchester Water Works and Auburn have battled in the courts for years over possible tax breaks, and the two entities eventually agreed on a payment instead of taxes, which last year amounted to $670,000, roughly 13 percent of Auburn's budget. Full-market value would have pushed the tax bill to around $825,000, he said.

For the proposed sale, both nonprofits are relying on securing a $2.2 million grant from the state Department of Environmental Services' Water Supply Land Protection Grant Program to pay for the purchase.

The Forest Society has offered $2.2 million for the land, minus certain expenses. The land trust raised its bid from $1.26 million to $2.45 million, Hyde said.

Forest Society spokesman Jack Savage said his nonprofit would love to own the property, but could do it only if it qualified for current use.

"We're not in a position to pay a large tax bill either, quite frankly," he said.